Chancellor George Osborne has quietly axed a much-hyped scheme to create private-sector jobs in regions such as the West Midlands – and insisted it is no longer needed.

Ministers have repeatedly boasted that grants from the Regional Growth Fund have persuaded firms to make investments, particularly in the north of England and the Midlands.

West Midlands firms received £403 million from the fund out of a total of £2.8 billion awarded nationwide - more than any other region except for the North West.

But the multi-billion pound initiative has now been scrapped.

The move appears to have been part of the Spending Review announced by Mr Osborne last week, although it was not made clear at the time.

A Government spokeswoman confirmed: “There will be no further rounds of the Regional Growth Fund.”

Asked why, she replied: “The economic context has changed since 2011, when the fund was first launched to create jobs and aid economic recovery.

“Now we have the seen the employment rate reach a record level, so there is not the same need for it anymore.”

The Regional Growth Fund was created specifically to help create private sector jobs in regions where they were needed.

As well as grants given to West Midlands firms, the region may also have benefited from £759 million paid from the fund to national schemes.

Documents published to accompany the Spending Review state that the English regions will now be helped by a £2bn-a-year Local Growth Fund, which is distributed to Local Enterprise Partnerships.

However, this is funding for new infrastructure projects such as roads, housing and training, which is designed to boost local economies but will not directly support businesses in the same way as the Regional Growth Fund. It largely replaces funding which was previously spent by central government.

A BIS report published in September said the Regional Growth Fund had handed out £1.5 billion, attracting a further £4.6bn in private-sector funds – and creating, or safeguarding 275,000 jobs.

Birmingham MP Richard Burden criticised the decision

Richard Burden, Labour MP for Birmingham Northfield, said: “This goes to show that you need to check your silverwear after the Chancellor visits because you cannot trust him.

“The Regional Growth Fund has never been all the Government said it was, but simply to scrap it is no answer.”